How the equity in your home could help you meet your financial goals

The strong economy and steadily rising home prices in many markets may have you enjoying the growing value of the equity in your home, and wondering how best to capitalize on it. Unlocking that equity via a Home Equity Line of Credit (HELOC) is one way to move you closer to your long-term financial goals. Explore your options below:

The goal: Maintain an emergency fund.

How a HELOC could help: Whether you haven't yet been able to set aside the recommended three to six months' worth of expenses in an account, or you've recently depleted your rainy day fund, a HELOC can serve as a backup source of emergency cash. Having a HELOC available means you've got an easy way to secure a large amount of money should an unanticipated expense arise.

Simply knowing the HELOC is there should give you peace of mind that even in a financial emergency, you won't have to resort to credit cards or tap into your retirement savings.

The goal: Get rid of high-interest debt.

How a HELOC could help: If medical bills or other expenses have left you with credit card balances you can't pay off, you can consolidate that debt with a HELOC to make it more manageable.

HELOC interest rates, which typically vary along with market interest rates, could be as low as a third of the rates of some credit cards, and you'll have only one monthly bill to pay. The longer-term repayment option means that your minimum monthly payments will be significantly lower. Plus, you'll have increased flexibility around how much to pay each month during the draw period of the HELOC.

The goal: Help pay for your child's education expenses.

How a HELOC could help: Interest rates on HELOCs are usually lower than those on Federal Parent PLUS loans. They may also be less than those available on private student loans. Some colleges even factor a family's home equity into their analysis when deciding what type of financial aid to offer to students.

Using a HELOC to pay for college has the added advantage of flexibility, since you can draw the funds only as you need them, such as when tuition payments are due. You can also use this option to pay for multiple children's education, while only having to apply once. Plus, you may not have to pay back the principal as quickly as you would on other types of loans.

The goal: Prepare for retirement.

How a HELOC could help: Using a HELOC when you're a few years away from retirement could help unlock cash flow and allow you to get your home retirement-ready. HELOC funds may be a smart way to fund home improvement projects, such as the installation of design features like a first-floor master bedroom that will allow you to stay in your home for as long as you want after you retire.

Having a HELOC as you enter retirement can help also because it gives you a ready source of cash for large purchases or unexpected expenses in the future, if you don't want to immediately pull money out of tax-deferred accounts or from a down stock market. Pro tip: Applying for a HELOC while you're still working may make it easier to qualify for a larger line than you might receive after you've retired.

More information

We are committed to helping you reach your potential by providing personalized solutions. Our dedicated colleagues can help you find the right product to help you reach your goals. To learn more about home equity, please call 1-888-514-2300, visit us online, or Ask a Citizen at your nearest Citizens branch.